Do Trump Trade Wars = Recession?

The Mortgage Corner

There are already signs President Trump’s trade wars are hurting. Right now, it’s mainly his Midwestern farm constituents that have seen their agricultural exports plummet. But what happens when rising prices from the tariffs are passed on to consumers, as well as the manufacturers with their increased costs from higher-priced imported components that go into manufactured products?

China accounted for 50 percent of all soybean exports before Trump began to raise tariffs. But no longer. Last November, Chinese soybean imports from the U.S. fell to zero, said the LATimes. 

“The share of total U.S. agricultural exports to China in value terms is projected to be 6 percent, down sharply, with China falling from the top market in 2017 to fifth place,” U.S. Department of Agriculture Chief Economist Robert Johansson told the agency’s annual forum in Washington on Thursday, Reuters reported. Johansson explained that the amount of soybeans exported this year compared with the same time last year decreased by 13.5 million metric tons.

“Under the trade dispute, exports to China alone have plummeted by 22 million tons, or over 90 percent,” he added. Overall, farm exports were projected to fall to $141.5 billion in 2019, a decrease of about $1.9 billion.

The result is farm bankruptcies in Wisconsin, Minnesota, Montana and the Dakotas have surged in the last two years, reaching 103 in 2018, according to the Federal Reserve Bank of Minneapolis. That’s the highest level since 2010, during the post-recession hangover.



“This trend has not yet seen a peak,” the Minneapolis Fed said in November, per the LATimes’ Michael Hiltzick. “One frustration for farmers and businesses suffering from the tariffs is that Trump appears to have no understanding of how tariffs work. In tweets, he has suggested that they’re paid by the exporting country — i.e., China, in the case of manufactured goods.”

They’re paid either by American importers if they maintain their pre-tariff prices to customers, or by consumers, hit with higher prices for imported goods. Even Trump economic advisor Lawrence Kudlow acknowledged over the weekend that the tariffs are “in effect … a tax increase” on Americans.

“Trump had promised to provide farmers with $15 billion in government relief, on top of the $12 billion he earlier pledged,” said Hiltzick. “But that could mean that American consumers pay twice for what appears to be Trump’s whim of iron on international trade — once in higher prices for foreign-made goods, and again to pay for the bailout for the agricultural sector.”

So manufacturing is another sector that is seeing rising costs. The Commerce Department just reported that both import and export prices are rising. U.S. import prices advanced 0.2 percent in April, after increasing 0.6 percent in March. (It said the April advance was driven by higher fuel prices, which more than offset decreasing prices for nonfuel imports.) But prices for U.S. exports also rose 0.2 percent in April after a 0.6-percent rise in March.

And Economics 101 says rising prices will kill any recovery, if prolonged. The danger of a prolonged trade war Deutsche Bank says in its most recent remarks, means that “aggressive posturing” aimed at getting concessions is often at the core of escalating conflicts such as what we’re seeing between Beijing and Washington.

Deutsche Bank says “The nature of trade wars (like actual wars) is that they foster nationalist sentiment and jingoism. The first shots are fired in the hope of quick victories. And before you know it, both sides are stuck in the trenches, with no obvious and politically feasible way out.”

I seriously doubt that President Trump will go that far in his need to feel like a winner, rather than be perceived as a loser.  But who knows, really, and that’s the problem. 

Harlan Green © 2019

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About populareconomicsblog

Harlan Green is editor/publisher of, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
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